Hohenberg v. Ferrero USA, Inc

Filing 56

SUPPLEMENTAL BRIEFING by Plaintiffs Athena Hohenberg, Laura Rude-Barbato re 51 MOTION for Class Certification. (Attachments: # 1 Declaration Corrected Declaration of Gregory S. Weston in Support of Motion for Class Certification, # 2 Exhibit 5, # 3 Exhibit 6, # 4 Exhibit 7, # 5 Exhibit 8, # 6 Exhibit 9, # 7 Exhibit 10, # 8 Exhibit 11, # 9 Exhibit 12, # 10 Exhibit 18, # 11 Exhibit 19, # 12 Exhibit 20, # 13 Exhibit 21, # 14 Exhibit 23, # 15 Exhibit 25, # 16 Exhibit 27, # 17 Exhibit 28, # 18 Exhibit 29, # 19 Exhibit 31)(Fitzgerald, John) (lmt).

1 LAW OFFICES OF RONALD A. MARRON, APLC 2 RONALD A. MARRON (175650) 3636 4th Avenue, Suite 202 3 San Diego, California 92103 4 Telephone: (619) 696-9006 Facsimile: (619) 564-6665 5 ron.marron@gmail.com 6 7 THE WESTON FIRM GREGORY S. WESTON (239944) JACK FITZGERALD (257370) MELANIE PERSINGER (275423) 888 Turquoise Street San Diego, California 92109 Telephone: (858) 488 1672 Facsimile: (480) 247 4553 greg@westonfirm.com jack@westonfirm.com mel@westonfirm.com 8 Interim Class Counsel 9 10 UNITED STATES DISTRICT COURT 11 SOUTHERN DISTRICT OF CALIFORNIA 12 13 14 IN RE FERRERO LITIGATION CASE NO. 3:11-CV-00205-H-CAB Pleading Type: Class Action Action Filed: February 01, 2011 15 16 17 18 19 20 21 MEMORANDUM OF POINTS & AUTHORITIES IN SUPPORT OF PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION AND APPOINTMENT OF CLASS COUNSEL [UNREDACTED VERSION FILED UNDER SEAL] Judge: Hon. Marilyn L. Huff Date: October 11, 2011 Time: 10:30 a.m. Location: Courtroom 13 22 23 24 25 26 27 28 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 2 TABLE OF CONTENTS TABLE OF AUTHORITIES ......................................................................................................... iii 3 4 INTRODUCTION ...........................................................................................................................1 5 FACTS .............................................................................................................................................3 6 A. 7 Ferrero Engaged in a Long-Term, Multi-Faceted Advertising Campaign Precision-Designed to Deceptively Suggest Nutella is Healthy ..............................3 8 1. Ferrero’s Efforts at Promoting Nutella as a Healthy Nut Spread ................3 2. Ferrero’s Ramped-Up “Breakfast Messaging” Advertising Campaign ...................................................................................................4 9 10 11 a. Nutella’s Label ...............................................................................4 b. Nationally-Aired Television Commercials and Promotion ...........4 c. Print Advertisements ......................................................................5 d. Online Advertising .........................................................................5 e. 12 Live Presentations to Consumer Influencers .................................5 13 14 15 16 3. 17 18 Ferrero’s Deceptive Omissions of Material Information .............................7 a. b. Serving Size ...................................................................................8 c. Proper Proportions for a “Balanced Breakfast” .............................9 d. Whole Grain .................................................................................11 e. 19 Sugar and Oil .................................................................................7 Connections Between Sugar, Saturated Fat, Trans Fat, and Disease .........................................................................................11 20 21 22 23 24 25 B. Plaintiffs Were Exposed to Ferrero’s Long-Term Advertising Campaign Precision-Tuned to Make Nutella Seem Healthy...................................................11 26 ARGUMENT .................................................................................................................................11 27 28 i In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 I. THIS CASE SATISFIES THE REQUIREMENTS OF RULE 23 ....................................11 2 A. Standards for Class Certification ...........................................................................11 3 B. Plaintiff Satisfies the Rule 23(a) Prerequisites ......................................................13 4 1. Numerosity .................................................................................................13 6 2. Commonality..............................................................................................14 7 3. Typicality ...................................................................................................14 4. Adequacy of Representation ......................................................................15 5 8 9 C. 10 11 The Proposed Class Satisfies Rule 23(b)(3) ..........................................................15 1. Common Issues Predominate .....................................................................16 12 a. 14 15 Plaintiffs Will Show Ferrero’s Liability by Common Evidence. ......................................................................................17 b. 13 Whether Ferrero’s Health and Balanced Breakfast Claims are Misleading is Subject to Common Proof and can Be Established without Individualized Proof of Reliance.................17 16 2. 17 Class Treatment is the Superior Means to Adjudicate Plaintiffs’ Claims ......................................................................................................20 18 19 II. BECAUSE SHUTTS IS SATISFIED, CALIFORNIA LAW APPLIES NATIONWIDE ................................................................................................................21 20 CONCLUSION ..............................................................................................................................25 21 22 23 24 25 26 27 28 ii In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION TABLE OF AUTHORITIES 1 2 CASES  3 Aguiar v. Cintas Corp. No. 2, 144 Cal. App. 4th 121 (2006) ..................................12 4 Amchem Prods. v. Windsor, 521 U.S. 591 (1997) ...................................................17 5 Baghdasarian v. Amazon.com, Inc., 258 F.R.D. 383 (C.D. Cal. 2009)...................21 6 7 Ballard v. Equifax Check Servs., Inc., 186 F.R.D. 589 (E.D. Cal. 1999)................24 Bateman v. Am. Multi-Cinema, Inc., 623 F.3d 708 (9th Cir. 2010) ........................24 8 9 Blackie v Barrack, 524 F.2d 891 (9th Cir. 1975) ....................................................13 10 Brockey v. Moore, 107 Cal. App. 4th 86 (2003) ......................................................19 11 Browning v. Yahoo! Inc., 2007 U.S. Dist. LEXIS 86266 (N.D. Cal. Nov. 12 16, 2007) ........................................................................................................14 13 Cartwright v. Viking Indus., 2009 U.S. Dist. LEXIS 83286 (E.D. Cal. Sept. 14, 2009) ...............................................................................................20 14 15 Chavez v. Blue Sky Natural Bev. Co, 268 F.R.D. 365 (N.D. Cal. 2010) .......... 15, 21 16 Church v. Consol. Freightways, Inc., 1992 U.S. Dist. LEXIS 18234 (N.D. Cal. Sept. 14, 1992) .............................................................................27 17 18 Cruz v. Dollar Tree Stores, Inc., 2009 U.S. Dist. LEXIS 46855 (N.D. Cal. May 26, 2009) ........................................................................................18 19 20 21 Deposit Guar. Nat’l Bank v. Roper, 445 U.S. 326 (1980) .............................................................................................................24 Doniger v. Pac. N.W. Bell, Inc., 564 F.2d 1304 (9th Cir. 1977) .............................24 22 23 24 Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974) ...............................................12 Estrella v. Freedom Fin. Network, LLC, 2010 U.S. Dist. LEXIS 61236 (N.D. Cal. June 2, 2010) ................................................................................23 25 26 Faigman v. AT&T Mobility LLC, 2007 U.S. Dist. LEXIS 52192 (N.D. Cal. July 17, 2007) .........................................................................................18 27 28 iii In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 Fitzpatrick v. General Mills, Inc., 263 F.R.D. 687 (S.D. Fla. 2010) .......................23 2 Fitzpatrick v. General Mills, Inc., 635 F.3d 1279 (11th Cir. 2011) ........................20 3 Gartin v. S&M NuTec LLC, 245 F.R.D. 429 (C.D. Cal. 2007) ...............................19 4 General Telephone Co. of Southwest v. Falcon, 457 U.S. 147 (1982)....................14 5 Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998) ................... 15, 16, 28, 29 6 7 8 9 Heffelfinger v. Elec. Data Sys. Corp., 2008 U.S. Dist. LEXIS 5296 (C.D. Cal. Jan. 7, 2008) .................................................................................... 12, 13 Hitt v. Arizona Bev. Co., LLC, 2009 U.S. Dist. LEXIS 16871 (S.D. Cal. Feb. 4, 2009) ..................................................................................................20 10 Hofstetter v. Chase Home Fin., LLC, 2011 U.S. Dist. LEXIS 38124 (N.D. Cal. Mar. 31, 2011) ........................................................................................12 11 12 Hurtado v. Super. Ct., 11 Cal. 3d 574 (1974) ..........................................................29 13 14 In re Activision Sec. Litig., 621 F. Supp. 415 (N.D. Cal. 1985) ..............................28 15 In re Ferrero Litig., 768 F. Supp. 2d 1074, 2011 U.S. Dist. LEXIS 50592 (S.D. Cal. May 11, 2011)...............................................................................26 16 In re Juniper Networks Sec. Litig., 264 F.R.D. 584 (N.D. Cal. 2009) ....................16 17 18 In re Ramtek Sec. Litig., 1991 U.S. Dist. LEXIS 5490 (N.D. Cal. Feb. 4, 1991) ..............................................................................................................12 19 In re Steroid Hormone Product Cases, 181 Cal. App. 4th 145 (2010) ...................22 20 21 Johnson v. General Mills, 2011 U.S. Dist. LEXIS 45120 (C.D. Cal. Apr. 20, 2011) ................................................................................................. 20, 23 22 Kagan v. Gibraltar Sav. & Loan Assn., 35 Cal. 3d 582 (1984)...............................22 23 Kearney v. Salomon Smith Barney, Inc., 39 Cal. 4th 95 (2006) ..............................29 24 25 Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941) ..........................................25 26 Madison Assocs. v. Baldante, 183 B.R. 206 (Bankr. C.D. Cal. 1995) ....................17 27 28 iv In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 Massachusetts Mutual Life Ins. Co. v. Super. Ct., 97 Cal. App. 4th 1282 (2002) .............................................................................................................21 2 3 4 Mazza v. Am. Honda Motor Co., 254 F.R.D. 610 (C.D. Cal. 2008)..... 14, 16, 18, 21 McAdams v. Monier, Inc., 182 Cal. App. 4th 174 (2010) .......................................21 5 Negrete v. Allianz Life Ins. Co. of N. Am., 238 F.R.D. 482 (C.D. Cal. 6 7 2006) ..............................................................................................................18 Nelson v. Mead Johnson Nutrition Co., 270 F.R.D. 689 (S.D. Fla. 2010) ..............19 8 Occidental Land, Inc. v. Super. Ct., 18 Cal. 3d 355 (1976) ....................................21 9 Outboard Maine Corp. v. Super. Ct., 52 Cal. App. 3d 30 (1975) ...........................22 10 11 Parkinson v. Hyundai Motor Am., 258 F.R.D. 580 (C.D. Cal. 2008) .............. 18, 27 12 Pecover v. Elec. Arts Inc., 2010 U.S. Dist. LEXIS 140632 (N.D. Cal. Dec. 21, 2010)........................................................................................ passim 13 Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985) ...........................................25 14 15 Quintero v. Mulberry Thai Silks, Inc., 2008 U.S. Dist. LEXIS 84976 (N.D. Cal. Oct. 21, 2008) ..............................................................................15 16 Rafton v. Rydex Series Funds, 2010 U.S. Dist. LEXIS 75411 (N.D. Cal. June 29, 2010) ................................................................................................26 17 18 Richmond v. Dart Indus., Inc., 29 Cal. 3d 462 (1981).............................................12 19 20 Roberts v. Heim, 670 F. Supp. 1466 (N.D. Cal. 1987) ............................................26 Sav-On Drug Stores, Inc. v. Super. Ct., 34 Cal. 4th 319 (2004) .............................12 21 22 23 Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 130 S. Ct. 1431 (2010) ....................................................................................................13 Smith v. Wells Fargo Bank, N.A., 135 Cal. App. 4th 1463 (2005) ..........................18 24 25 26 Stuart v. RadioShack Corp., 2009 U.S. Dist. LEXIS 12337 (N.D. Cal. Feb. 5, 2009) ..................................................................................................17 United Steel v. ConocoPhillips Co., 593 F.3d 802 (9th Cir. Cal. 2010)..................13 27 28 v In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 Wal-Mart Stores, Inc. v. Dukes., 180 L. Ed. 2d 374 (2011) ............................. 14, 15 2 Wash. Mut. Bank v. Super. Ct., 24 Cal. 4th 906 (2001).............................. 25, 26, 28 3 Wershba v. Apple Computer, Inc., 91 Cal. App. 4th 224 (2001).............................28 4 Wiegele v. FedEx Ground Package Sys., 2008 U.S. Dist. LEXIS 10246 5 (S.D. Cal. Feb. 12, 2008) ...............................................................................13 6 Williams v. Gerber Prods. Co., 552 F.3d 934 (9th Cir. Cal. 2008) .........................22 7 Wolph v. Acer Am. Corp., 272 F.R.D. 477 (N.D. Cal. 2011) ..................................23 8 Yumul v. Smart Balance, Inc., 733 F. Supp. 2d 1117 (C.D. Cal. 2010) ..................20 9 10 STATUTES 11 12 13 14 Cal. Bus. & Prof. Code §§ 17200 et seq. ........................................................................................ 2 Cal. Bus. & Prof. Code §§ 17500 et seq. ........................................................................................ 3 Cal. Civ. Code §§ 1750 et seq......................................................................................................... 3 15 Cal. Civ. Code §§ 1770 et seq....................................................................................................... 13 16 Cal. Civ. Code § 1781(a) .............................................................................................................. 13 17 18 19 20 21 22 23 24 25 26 27 28 vi In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION Plaintiffs Athena Hohenberg and Laura Rude-Barbato respectfully submit this 1 2 Memorandum in support of their Motion to (a) certify a nationwide class for the UCL, FAL and 3 CLRA causes of action alleged in their First Amended Consolidated Complaint (“FAC,” Dkt. 4 No. 45) against Defendant, Ferrero U.S.A., Inc.; (b) appoint them Class Representatives; and (c) 5 appoint their attorneys Class Counsel. INTRODUCTION 6 Since before the putative class period began on January 1, 2000, Ferrero has been using 7 8 deceptive practices and misleading advertising to market Nutella as a healthy nut butter despite 9 that it is comprised mostly of sugar and oil laden with cholesterol-raising saturated fat. And, 10 Ferrero misleadingly advertised Nutella as healthy despite that for most the class period it was 11 comprised of partially hydrogenated vegetable oil containing 12 toxic artificial trans fat per serving, of See 13 generally FAC ¶¶ 44-70. In 2008, Ferrero devised a plan to increase Nutella’s sales by leveraging and bolstering 14 15 its health and wellness marketing with a new advertising campaign backed by a published author 16 on childhood nutrition, Connie Evers, who was hired to tell consumers—especially mothers like 17 Ms. Hohenberg and Ms. Rude-Barbato—that Nutella is part of a daily “balanced breakfast” for 18 children.2 See Ex. 2, Evers Dep. Tr. 366:7-19 (Ferrero’s “breakfast” pitch is directed to mothers 19 of school-aged children). Ferrero also revamped Nutella’s label to include a “balanced breakfast” 20 claim, and began running a series of national television commercials and print ads conveying the 21 same breakfast messaging. FAC ¶¶ 77, 91-93. 22 23 24 25 26 1 All exhibit references are to the concurrently-filed Declaration of Gregory S. Weston in Support of Class Certification. All references to “Pl’s Ex. __” are to deposition exhibits. 2 Evers has made a career out of touting highly-processed foods as beneficial for children on 27 behalf of the processed food industry. For example, she is currently or has in the past provided consulting services to companies like Heinz, for its Bagel Bites microwave pizza product, Nestle, 28 for its Nesquick product (87% sugar), Chiquita for a smoothie product (90% sugar), and Kellogg. See Ex. 2, Evers Dep. Tr. 30:2-32:16. 1 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 label of every jar of Nutella, in nationally-disseminated television and print ads, on the web, and 2 in materials provided at live presentations, all as part of a long-term, multi-media advertising 3 campaign. 4 Plaintiffs seek class certification of their claims for violation of the Unfair Competition 5 Law, Cal. Bus. & Prof. Code §§ 17200 et seq., the False Advertising Law, id. §§ 17500 et seq., 6 and the Consumer Legal Remedies Act, Cal. Civ. Code §§ 1750 et seq., on behalf of the 7 following Classes: 8 Restitution Class: All Persons (excluding officers, directors and 9 employees of Ferrero) who purchased, on or after January 1, 2000 (the “Class 10 Period”), one or more Nutella® products in the United States for their own or 11 household use rather than resale or distribution. 12 Injunctive Relief Class: All persons (excluding offices, directors, and 13 employees of Ferrero) who commonly purchase or are in the market for Nutella in 14 the United States for their own or household use rather than resale or distribution. 15 FACTS 16 A. 17 Ferrero Engaged in a Long-Term, Multi-Faceted Advertising Campaign PrecisionDesigned to Deceptively Suggest Nutella is Healthy 18 1. 19 Ferrero’s efforts to promote Nutella as a healthy food predate even the proposed class Ferrero’s Efforts at Promoting Nutella as a Healthy Nut Spread 20 period, beginning when Nutella was introduced in the United States in 1983, FAC ¶ 2, with 21 Ferrero’s attempt to position the product as a healthy European alternative to peanut butter. 22 During the class period, from January 2000 through late 2008, Ferrero labeled and marketed 23 Nutella as a “hazelnut spread,” made with “over 50 hazelnuts per jar,” deceptively implying 24 Nutella is made primarily with nuts and is therefore healthy, despite the fact it is comprised of 25 only 13% hazelnuts but 70% sugar and cheap refined vegetable oils. Id. ¶¶ 2, 24-25 75, 77, 81, 26 91-93. Peanut butter, by contrast, has an FDA-defined standard of identity of 90% peanuts. 21 27 C.F.R. § 164.150(a). Ferrero buttressed these representations with claims that Nutella contains 28 “quality ingredients, such as skim milk and a hint of cocoa,” and is made without artificial 3 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 flavoring and coloring, despite its sugar, saturated fat, and trans fat content. See generally Ex. 2, 2 Evers Dep. Tr. at 125:23-126:11, 164:20-165:15, 222:11-223:5 (Evers was hired to promote the 3 breakfast messaging, not these prior health and wellness messages). Finally, to bolster the image 4 of Nutella as healthy, Ferrero improperly categorized it for placement in grocery stores as a nut 5 spread, like peanut butter, rather than a sugary dessert spread, like icing. FAC ¶ 98. 6 2. Ferrero’s Ramped-Up “Breakfast Messaging” Advertising Campaign 7 In approximately 2008, Ferrero concocted a plan to increase Nutella’s sales by 8 buttressing these health and wellness claims with an aggressive “breakfast messaging” campaign. 9 That messaging included consistent claims that Nutella was part of and contributed to a 10 “balanced” or “healthy” breakfast, especially for school-aged children. 11 12 a. Nutella’s Label As part of its breakfast messaging, Ferrero labeled Nutella to show a photo of fruit, 13 orange juice, milk, and a piece of toast slathered with Nutella, alongside copy saying Nutella is 14 supposedly “An example of a tasty yet balanced breakfast,” and instructing consumers to “Start 15 your day with Nutella® spread . . .”. Id. ¶ 77. Nutella’s label also includes two references to the 16 Nutella website, which is filled with even more extensive breakfast messaging. And the label still 17 repeats Ferrero’s earlier misleading messages that Nutella is a “hazelnut spread,” is “made with 18 over 50 hazelnuts per jar,” and contains no artificial colors or preservatives. 19 20 b. Nationally-Aired Television Commercials and Promotion As part of its breakfast messaging, Ferrero ran three nationally-aired television 21 commercials. Id. ¶¶ 90-96. See also Ex. 2, Evers Dep. Tr. at 113:1-117:19, 247:21-248:16 22 (discussing commercials). Ferrero also promoted Nutella through an appearance Evers made on 23 television, during a “back to school breakfast” segment on a local news channel. 24 25 26 See Ex. 2, Evers Dep. Tr. at 98:10-100:21. While promoting a Nutella breakfast as 27 “healthy” on the segment, Evers also misleadingly contrasted Nutella for breakfast with “sugary 28 cereals.” See http://www.katu.com/amnw/segments/101393754.html. 4 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 2 c. Print Advertisements Ferrero’s breakfast messaging was also conveyed in several national print magazines, 3 including Working Mother, Parents, Parenting – School Years, Woman’s Day, Good 4 Housekeeping, and Ready, Set, Grow, a journal published by the National Association of 5 Pediatric Nurse Practitioners. See Ex. 2, Evers Dep. Tr. at 118:14-25; Exs. 6-8 (print ads); Ex. 9 6 (CEVERS221) (attaching materials for publication); Ex. 10 (CEVERS946-47) (noting “Nutella 7 named one of Good Housekeeping’s ’50 Best Low-Calorie Snacks” and attaching article 8 claiming Nutella is “low on unhealthy fat”). Ferrero also disseminated an “advertorial” as part of 9 these print advertisements, in which Evers recommends consumption of Nutella. See Ex. 11 (Pl’s 10 Ex. 43); Ex. 2, Evers Dep. Tr. 181:3-20. 11 12 d. Online Advertising Ferrero heavily touted its breakfast messaging on the Nutella website, whose address 13 appears on the Nutella label twice. See FAC ¶¶ 78-89; Ex. 2, Evers Dep. Tr. 169:13-15. But the 14 messaging appeared elsewhere online, too. Failing once again to disclose her position as 15 Nutella’s paid spokesperson, when approached by a reporter for Nickelodeon’s Parents Connect 16 website for an article on children’s snacks, Evers provided information that led the reporter to 17 write: 18 19 If your kids aren’t hummus fans, stash a container of Nutella in your room. Made from hazelnut, skim milk and cocoa, your kids won’t even realize it’s an allnatural, good-for-you dip for their crackers or pretzels. 20 See Ex. 12, (Pl’s Ex. 33, Slide No. 7). Just about everything in this description is inaccurate. 21 While Evers claims she did not provide the inaccurate information, both she and Ferrero have 22 known this was published in an online parents’ magazine for over a year, but neither has sought 23 to correct it. See Ex. 2, Evers Dep. Tr. 141:20-148:2, 149:21-150:11, 151:13-152:23. The Nutella 24 breakfast messaging has appeared elsewhere online, too, for example at RealSimple.com. See 25 Ex. 9 (CEVERS221). 26 27 e. Live Presentations to Consumer Influencers One of the first strategies Ferrero employed to promote its breakfast messaging was 28 5 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 But Ferrero was not content with just seeking to solicit medical professionals to sell 20 Nutella to moms. It also made significant forays into the world of social media, hosting or 21 participating in various “blogger” events and “Mommy Parties.” For example, Ferrero set up an 22 event in New York, where Evers appeared live in front of approximately 25 “mommy bloggers.” 23 See, e.g., Ex. 18 (CEVERS185) (“As part of our Nutella campaign, we are pulling together a 24 r event where we’re inviting mom bloggers to meet with Nutella and learn about our 25 breakfast positioning. 26 27 28 6 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION Evers also represented Nutella at the San Francisco “BlogHer” event, a similar gathering 1 2 of consumers and food bloggers. Ex. 19 (CEVERS1068-70); Ex. 2, Evers Dep. Tr. at 317:143 318:20. Spokesperson Evers also appeared at Nutella “Mommy Parties” in California and 4 elsewhere, touting the purported nutritional qualities of Nutella to mothers. See Ex. 20, 5 CEVERS1155-57 (describing Mommy Parties in California and Colorado).3 3. 6 Ferrero’s Deceptive Omissions of Material Information a. 7 Sugar and Oil While touting the purported health qualities of Nutella, Ferrero at the same time 8 9 deceptively omitted material information about the product’s sugar and fat content. See FAC ¶¶ 10 28, 95, 97, 9; Ferrero even went so far as to tell consumers Nutella has only four 11 12 ingredients, which is wholly false. The following messages were “live tweeted”5 from consumers 13 attending the Mommy Blogger Roundtable event hosted by Evers and Karl Krohn, Nutella’s 14 brand manager: 15 classymommy (6,240 followers) 16 • Surprised to learn #nutella only has 4 ingredients- hazlenuts, skim milk, sugar, hint of cocoa 17 jenrab (2,615 followers) 18 • #nutella has 4 ingredients. Hazelnut, cocoa, skim milk and sugar (nom nom) 19 • nutella can be considered a vehicle for eating healthy items for breakfast 20 • #nutella does have nutritious properties but as with everything, it should be eaten in 21 moderation 22 • #nutella is a hazelnut spread and NOT a chocolate spread 23 3 However, rather than being used as a vehicle for promoting Nutella as a breakfast food for 24 children, these parties often featured decadent Nutella recipes, even Nutella cocktails. This is a 25 typical use for Nutella. For example, Evers told Ferrero that she was “a little worried that too many of the BlogHers are more geared towards the decadent side of Nutella, using it as an 26 ingredient in rich desserts.” Ex. 21 (Pl’s Ex. 48). See generally Evers Dep. Tr. 319:23-321:6 (discussing use of Nutella in desserts). 27 4 Ex. 22 (Pl’s Ex. 44). 5 28 i.e., sent short messages about the event to their “followers” via the micro-blogging website, Twitter.com, while reacting to, or sometimes repeating verbatim, comments made by Ferrero. 7 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 ComplicatedMama (4,424 followers) 2 • If you are sending a #nutella sandwich to school for Lunch. Send in a string cheese for extra 3 protein 4 • #nutella sandwich is Really not more sugary than PB&J 5 • Did you Know there’s actually very little chocolate in #nutella? It’s hazelnuts, skim milk, and 6 a hint of cocoa. 7 Dagmar Bleasdale (3,857 followers) 8 • back from the #Nutella event in NYC. I learned that it’s actually a nut butter, not chocolate 9 butter. NUTtella ) Plus it’s gluten free! 10 primetimeparent (3,183 followers) 11 • What is in #nutella?? Hazelnut, skim milk, sugar, & cocoa I’m in love & #kosher O U D (not 12 #kosher 4 Passover) 13 See Ex.23 (Pl’s Ex. 63, at CEVERS 280, 282-84, 286-87); see also Ex. 2, Evers Dep. Tr. at 14 306:2-317:5. Ferrero similarly omits information about sugar and oil when it promotes Nutella’s 15 “healthier” ingredients, like skim milk, even if these ingredients form a miniscule portion of the 16 product. See Ex. 2, Evers Dep. Tr. at 174:9-176:19. 17 18 b. Serving Size Although the ideas of moderation and proper serving size are fundamental elements of 19 using Nutella in the “proper” way, see, e.g., Ex. 2, Evers Dep. Tr. at 94:6-14, 323:5-12, Ferrero 20 has repeatedly attempted to skirt the issue. 21 22 23 24 25 26 27 28 8 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 Nutella on its own, we don’t want to be perceived as making health or nutrition claims”), Evers 2 testified that “balanced” in the context of Ferrero’s advertising is nevertheless a euphemism for 3 “healthy.” Ex. 2, Evers Dep. Tr. at 247:15-20. This is also apparent in Ferrero’s communications, 4 where Ferrero uses “balanced” and “healthy” interchangeably. See, e.g., 5 6 Ex. 31 (CEVERS265) ( “I am very excited about the work that 7 8 Ferrero is doing in regards to . . . the role that Nutella plays in promoting a healthy breakfast.”); 9 Ex. 32 (CEVERS38) (Evers’ job duties as Nutella spokesperson would include “incorporating 10 Nutella into an overall healthy, balanced breakfast”). A breakfast is healthy for children, according to Evers, if it “has the correct ratio of 11 12 carbohydrate, protein, and fat” and “includes a fruit or a vegetable, and . . . a protein source.” Id. 13 at 127:23-128:3; see also id. at 131:5-8. Evers testified that the “correct ratio” should be 14 determined by reference to the Institute of Medicine’s recommendations. Id. 216:12-25.7 But none of this information appears in any of Ferrero’s promotional materials for 15 16 Nutella. See Evers Dep. Tr. 125:6-132:8 (Nutella “about” webpage does not discuss proper 17 proportions for a “balanced breakfast”); 167:6-168:10 (Nutella label does not give any indication 18 of the correct proportions for a “balanced breakfast”); 224:16-225:18 (although “balanced 19 breakfast” has a specific, qualitative meaning, Ferrero uses the term on Nutella’s label without 20 providing that information); 278:14-281:2 (Nutella “advertorial” used phrases like “appropriate 21 amount” and “dab” instead of providing specific measurements to create a properly 22 proportioned, “balanced breakfast”); 291:18-292:10 (Evers does not think it is necessary to tell 23 consumers “every single time,” when defining “balanced breakfast,” what the proper proportions 24 for a balanced breakfast are). 25 26 27 28 7 According to IOM, protein should account for 10-25% of daily calories, carbohydrate 45-65%, and fat 20-35%. Id. 10 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION d. 1 Whole Grain According to Evers, using Nutella with whole grains is a critical part of the breakfast 2 3 messaging. See, e.g., Ex. 2, Evers Dep. Tr. at 146:2-3 (“I always recommend Nutella in 4 conjunction with a whole grain”).8 Nevertheless, Ferrero has often tempered its whole grain 5 messaging, 6 7 8 Evers testified this i language is inconsistent with breakfast messaging she endorses. 9 See Ex. 2, Evers Dep. Tr. at 165:23-166:11, 341:6-342:7. e. 10 Connections Between Sugar, Saturated Fat, Trans Fat, and Disease Finally, Ferrero has consistently omitted material information about the effect of 11 12 Nutella’s ingredients on consumers’ health. See generally FAC ¶¶ 35-74. 13 B. 14 Plaintiffs Were Exposed to Ferrero’s Long-Term Advertising Campaign Precision-Tuned to Make Nutella Seem Healthy 15 Plaintiffs are both mothers of young children and were exposed to and relied upon 16 Ferrero’s deceptive campaign, including through Ferrero’s television commercials and product 17 label. See, e.g., id. at ¶¶ 9, 24, 26-32, 76-96, 99-102, 104-106. 18 ARGUMENT 19 I. THIS CASE SATISFIES THE REQUIREMENTS OF RULE 23 20 A. 21 California “has a public policy which encourages the use of the class action device.” Standards for Class Certification 22 Richmond v. Dart Indus., Inc., 29 Cal. 3d 462, 473 (1981); Aguiar v. Cintas Corp. No. 2, 144 23 Cal. App. 4th 121, 132 (2006) (quoting Sav-On Drug Stores, Inc. v. Super. Ct., 34 Cal. 4th 319, 24 340 (2004)). “In determining whether class certification is appropriate, ‘the question is not 25 whether the plaintiff or plaintiffs have stated a cause of action or will prevail on the merits, but 26 rather, whether the requirements of Rule 23 are met.’” Hofstetter v. Chase Home Fin., LLC, 2011 27 8 See also Evers “Mommy Party” interview, available at 28 http://www.youtube.com/watch?v=gocrTJN0DPw (“I would always use [Nutella] with whole grain”) 11 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 U.S. Dist. LEXIS 38124, at *16 (N.D. Cal. Mar. 31, 2011) (quoting Eisen v. Carlisle & 2 Jacquelin, 417 U.S. 156, 178 (1974)); see also In re Ramtek Sec. Litig., 1991 U.S. Dist. LEXIS 3 5490, at *9 (N.D. Cal. Feb. 4, 1991) (“In determining whether to certify a class, the focus is 4 simply whether the prerequisites of Fed. R. Civ. P. 23 have been met.”). 5 The party seeking certification must make “a prima facie showing that each of the 6 prerequisites set forth in Rule 23(a) has been satisfied, i.e., (1) numerosity; (2) commonality; (3) 7 typicality; and (4) adequacy of representation.” Heffelfinger v. Elec. Data Sys. Corp., 2008 U.S. 8 Dist. LEXIS 5296, at *25 (C.D. Cal. Jan. 7, 2008). Upon such showing, “a plaintiff whose suit 9 meets the specified criteria” is “entitl[ed]” to an order of certification, as the “discretion 10 suggested by Rule 23’s ‘may’ is discretion residing in the plaintiff” rather than the court. Shady 11 Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 130 S. Ct. 1431, 1437-38 (2010). 12 When ruling on “a motion for class certification, the court ‘is bound to take the 13 substantive allegations of the complaint as true.’” Wiegele v. FedEx Ground Package Sys., 2008 14 U.S. Dist. LEXIS 10246, at *8 (S.D. Cal. Feb. 12, 2008) (quoting Blackie v Barrack, 524 F.2d 15 891, 901 n.17 (9th Cir. 1975)). Likewise, “in deciding whether to certify a class under Rule 23, 16 an inquiry regarding ‘the merits of the claims is [generally] inappropriate.’” Heffelfinger, 2008 17 U.S. Dist. LEXIS 5296, at *32 (quoting 7A Charles Alan Wright, Arthur R. Miller & Mary Kay 18 Kane, Federal Practice & Procedure: Civil 2d § 1759 (2006)). 19 20 21 In determining the propriety of a class action, . . . [n]either the possibility that a plaintiff will be unable to prove his allegations, nor the possibility that the later course of the suit might unforeseeably prove the original decision to certify the class wrong, is a basis for declining to certify a class which apparently satisfies [FRCP 23]. 22 Pecover v. Elec. Arts Inc., 2010 U.S. Dist. LEXIS 140632, at *22-23 (N.D. Cal. Dec. 21, 2010) 23 (quoting United Steel v. ConocoPhillips Co., 593 F.3d 802, 808-809 (9th Cir. 2010) (citations 24 omitted)). 25 Moreover, on “a motion for class certification . . . the court makes no findings of fact” 26 and “the Federal Rules of Evidence take on a substantially reduced significance, as compared to 27 a typical evidentiary hearing or trial.” Mazza v. Am. Honda Motor Co., 254 F.R.D. 610, 616 28 (C.D. Cal. 2008) (citation omitted). Sometimes, however, the court must “probe behind the 12 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 pleadings” to determine that the requirements of Rule 23(a) have been met. Such analysis “will 2 entail some overlap with the merits of the plaintiff’s underlying claim.” Wal-Mart Stores, Inc. v. 3 Dukes, 180 L. Ed. 2d 374, 390 (2011) (“Wal-Mart”) (quoting General Telephone Co. of 4 Southwest v. Falcon, 457 U.S. 147, 160 (1982)). 5 After satisfying the Rule 23(a) requirements, “the proposed class must satisfy at least one 6 of the three requirements listed in Rule 23(b),” Wal-Mart, 180 L. Ed. 2d at 387. Plaintiffs seek 7 certification under Rule 23(b)(3), which is appropriate where the “questions of law or fact 8 common to class members predominate over any questions affecting only individual members, 9 and . . . a class action is superior to other available methods for fairly and efficiently adjudicating 10 the controversy.” Fed. R. Civ. P. 23(b)(3). These prerequisites are referred to as predominance 11 and superiority. See, e.g., Browning v. Yahoo! Inc., 2007 U.S. Dist. LEXIS 86266, at *27-28 12 (N.D. Cal. Nov. 16, 2007). 13 14 15 B. Plaintiff Satisfies the Rule 23(a) Prerequisites 1. Numerosity Numerosity is generally satisfied if a proposed class has at least 40 members. See Mazza, 16 254 F.R.D. at 617 (“As a general rule, classes of forty or more are considered sufficiently 17 numerous.”). A Ferrero document indicates 18 19 20 several times that many must have purchased it in the preceding decade, during the 21 putative class period. In addition, Nutella has been sold in grocery stores, discount stores like 22 Wal-Mart and Target, and club stores like Sam’s Club and CostCo, throughout the country. 23 Ferrero’s net Nutella sales from 2007 to 2010 totaled 24 Accordingly, numerosity is satisfied. See Chavez v. Blue Sky Natural Beverage Co., 268 F.R.D. 25 365, 377 (N.D. Cal. 2010) (inferring “from the allegation that Blue Sky sold over $20 million of 26 product . . . that there are numerous purchasers who are potential class members so as to satisfy 27 the numerosity requirement”). 28 13 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 2. 1 2 Commonality To certify a class, there must be “questions of law or fact common to the class.” Fed. R. 3 Civ. P. 23(a)(2). “In the Ninth Circuit, the requirements of Rule 23(a)(2) are to be construed 4 ‘permissively.’” Quintero v. Mulberry Thai Silks, Inc., 2008 U.S. Dist. LEXIS 84976, at *8 5 (N.D. Cal. Oct. 21, 2008) (quoting Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 6 1998)). For the purposes of Rule 23(a)(2), a single question of law or fact common to the class 7 will satisfy the commonality requirement. Wal-Mart, 180 L. Ed. 2d at 395 (internal citations 8 omitted) (“We quite agree that…even a single common question will do[.]”). The FAC identifies 9 a number of significant common questions of fact and law: 10 (a) Whether Ferrero contributed to, committed, and/or is responsible for the conduct alleged; 11 12 (b) Whether Ferrero’s conduct constitutes the violations of law; 13 (c) Whether Ferrero acted willfully, recklessly, negligently, or with gross negligence; 14 15 (d) Whether Class Members are entitled to injunctive relief; and 16 (e) Whether Class Members are entitled to restitution. 17 FAC at ¶ 120a-e. In addition, each of Plaintiffs’ claims presents common questions of whether 18 the elements are satisfied. For example, for Plaintiffs’ UCL claims, the materiality of Ferrero’s 19 representations is a common question. 20 21 3. Typicality The typicality prerequisite of Rule 23(a)(3) is also a “permissive standard” and the named 22 plaintiffs’ claims are typical if they are “reasonably co-extensive with those of absent class 23 members.” Hanlon, 150 F.3d at 1020. They “need not be identical or even substantially identical. 24 . . . [but] need only be similar . . . .” Mazza, 254 F.R.D. at 618 (emphasis in original); see also In 25 re Juniper Networks Sec. Litig., 264 F.R.D. 584, 589 (N.D. Cal. 2009) (“[T]he typicality 26 requirement is permissive: representative claims are ‘typical’ if they are reasonably co-extensive 27 . . . they need not be substantially identical.” (citations omitted)). Plaintiffs satisfy the typicality 28 standard because their claims are identical to the claims of other Class Members: in order to 14 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 induce consumers to purchase Nutella, Ferrero deceptively labeled and marketed the product as 2 healthful, like peanut butter, part of a “balanced breakfast,” and appropriate for school-aged 3 children for breakfast, despite the fact Nutella is made primarily of high-saturated-fat palm oil 4 plus sugar and—during much of the class period—contained highly toxic artificial trans fat, all 5 of which increase the risk of cardiovascular disease, childhood type-2 diabetes, and other chronic 6 diseases. The typicality requirement is thus satisfied. 4. 7 Adequacy of Representation “To meet the requirement of adequacy of representation, the class representatives must 8 9 not have interests antagonistic to the unnamed class members and the representative must be able 10 to prosecute the action vigorously through qualified counsel.” Mazza, 254 F.R.D. at 619 (citation 11 omitted). While a plaintiff has the burden of persuasion, adequacy is presumed absent evidence 12 to the contrary. See Madison Assocs. v. Baldante, 183 B.R. 206, 217 (Bankr. C.D. Cal. 1995). A 13 “plaintiff may adequately represent the class if he or she has a basic understanding about the 14 nature of the suit.” Stuart v. RadioShack Corp., 2009 U.S. Dist. LEXIS 12337, at *33 (N.D. Cal. 15 Feb. 5, 2009) (citation omitted). Here, there is no conflict of interest between the proposed Class 16 Representatives, their counsel, and the Class. On the contrary, Plaintiffs and the unnamed Class 17 Members share a common interest in establishing Ferrero’s liability. Rule 23(g)(1) also requires the Court to appoint Class Counsel. For the reasons set forth 18 19 in the concurrently-filed Declarations of Gregory S. Weston, Jack Fitzgerald, and Ronald A. 20 Marron, Plaintiffs request the Court appoint The Weston Firm and the Law Offices of Ronald A. 21 Marron, APLC as Class Counsel.9 22 C. The Proposed Class Satisfies Rule 23(b)(3) 23 The proposed Class satisfies both the predominance and superiority components of Rule 24 23(b)(3). 25 26 27 9 The Court has already appointed the Weston Firm and Law Offices of Ronald A. Marron Interim Class Counsel, finding “[e]ach proposed class counsel appears to be well qualified to 28 represent the interests of the purported class and to manage this litigation.” Hohenberg v. Ferrero U.S.A., Inc., 2011 U.S. Dist. LEXIS 38471, at *6 (S.D. Cal. Mar. 22, 2011). 15 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1. 1 2 Common Issues Predominate While Rule 23(a) requires only the existence of common questions among members of 3 the proposed class, certification under Rule 23(b)(3) requires a finding that those common 4 questions predominate over individual ones. 5 Here, the central, overriding, and predominating question is whether a limited group of 6 label claims and advertisements are misleading. This determination is not made with regard to 7 each class member, but under a single, objective, and common “reasonable consumer standard.” 8 See Amchem Prods. v. Windsor, 521 U.S. 591, 625 (1997) (“Predominance is a test readily met 9 in certain cases alleging consumer . . . fraud”); Mazza, 254 F.R.D. 610 (certifying UCL, FAL, 10 and CLRA class where defendant misrepresented the characteristics of its Collision Mitigation 11 Braking System); Faigman v. AT&T Mobility LLC, 2007 U.S. Dist. LEXIS 52192 (N.D. Cal. 12 July 17, 2007) (certifying UCL, FAL, and CLRA class where defendant advertised company 13 debit cards as cash-equivalent rebates); Negrete v. Allianz Life Ins. Co. of N. Am., 238 F.R.D. 14 482 (C.D. Cal. 2006) (certifying UCL and FAL class where defendant misled the class into 15 purchasing deferred annuities); Smith v. Wells Fargo Bank, N.A., 135 Cal. App. 4th 1463 (2005) 16 (certifying UCL, FAL, and CLRA class where defendant misrepresented an involuntarily per17 transaction “overdraft protection” charge on checking account cards). 18 “The predominance inquiry hinges on the cohesiveness of the class—whether common 19 legal and factual questions appear more significant than individual legal and factual questions.” 20 Parkinson v. Hyundai Motor Am., 258 F.R.D. 580, 588-89 (C.D. Cal. 2008); see also Pecover, 21 2010 U.S. Dist. LEXIS 140632, at *45 (“The predominance inquiry focuses on ‘whether 22 proposed classes are sufficiently cohesive to warrant adjudication by representation.’”(citation 23 omitted)). “[W]hen common questions present a significant aspect of a case and they can be 24 resolved for all members of the class in a single adjudication, there is clear justification for 25 handling the dispute on a representative rather than an individual basis.” Cruz v. Dollar Tree 26 Stores, Inc., 2009 U.S. Dist. LEXIS 46855, at *21-22 (N.D. Cal. May 26, 2009) (citation 27 omitted). 28 16 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 The predominance requirement demands only predominance of common questions, not 2 exclusivity or unanimity of them. Fed. R. Civ. P. 23(b)(3); see also Gartin v. S&M NuTec LLC, 3 245 F.R.D. 429, 435 (C.D. Cal. 2007) (“When one or more of the central issues in the action are 4 common to the class and can be said to predominate, [a class action] will be considered proper . . 5 . even though other matters will have to be tried separately.” (citation omitted)). 6 7 a. Plaintiffs Will Show Ferrero’s Liability by Common Evidence. Where plaintiffs “may prove the essential issues in [the] case with common proof, . . . 8 class-wide issues predominate over individualized issues.” Nelson v. Mead Johnson Nutrition 9 Co., 270 F.R.D. 689, 697-98 (S.D. Fla. 2010). “[T]he primary evidence in a false advertising 10 case is the advertising itself.” Brockey v. Moore, 107 Cal. App. 4th 86, 100 (2003). 11 Ferrero’s Nutella has been the subject of a well-documented, long-term advertising 12 campaign. This campaign took place on the packaging of every Nutella jar Class Members saw 13 during the Class Period. Plaintiffs offer dozens of examples of Ferrero’s advertising, specifically 14 on Nutella’s packaging and elsewhere in print and media advertisements. 15 Plaintiffs will also prove elements of their claims by offering expert testimony on the 16 health effects of consuming Nutella. The jury may then determine whether a reasonable 17 consumer would find Ferrero’s advertising and labeling misleading, given evidence of the 18 product’s actual effects on human health. In addition, if necessary, Plaintiffs may offer the 19 testimony of a consumer survey expert to show how consumers interpret Ferrero’s claims. See 20 generally Hitt v. Arizona Bev. Co., LLC, 2009 U.S. Dist. LEXIS 16871, at *16-19 (S.D. Cal. Feb. 21 4, 2009) (permitting plaintiff “the opportunity to present evidence, such as a consumer survey, 22 showing that [Defendant’s] labeling and promotion is likely to deceive reasonable consumers”); 23 see also Yumul v. Smart Balance, Inc., 733 F. Supp. 2d 1117, 1129 (C.D. Cal. 2010). 25 Whether Ferrero’s Health and Balanced Breakfast Claims are Misleading is Subject to Common Proof and can Be Established without Individualized Proof of Reliance. 26 If Ferrero’s health and balanced breakfast claims concerning Nutella are “likely to 27 deceive” a reasonable consumer, Ferrero is liable under the UCL without individual evidence of 28 reliance or deception. See Tobacco II, 46 Cal. 4th at 306, 312, 320-24. As noted by another 24 b. 17 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 federal court deciding a motion to certify a UCL class against a packaged food manufacturer: 2 3 4 individualized proof of deception and reliance are not necessary for [Plaintiff] to prevail on the [UCL and CLRA] class claims . . . the common issue that predominates is whether [Defendant’s] packaging and marketing communicated a persistent and material message that [the product] promotes digestive health. 5 Johnson v. General Mills, 2011 U.S. Dist. LEXIS 45120, at *13-14 (C.D. Cal. Apr. 20, 2011). 6 See also Cartwright v. Viking Indus., 2009 U.S. Dist. LEXIS 83286, at *36-37 n.11 (E.D. Cal. 7 Sept. 11, 2009) (“To state a claim under [the UCL], plaintiffs must demonstrate that members of 8 the public are likely to be deceived. The standard is that of a ‘reasonable consumer,’ and proof of 9 actual deception or confusion caused by misleading statements is not required. Therefore, this 10 claim[] is subject to common proof by the class.”); Fitzpatrick v. General Mills, Inc., 635 F.3d 11 1279, 1282-83 (11th Cir. 2011); McAdams v. Monier, Inc., 182 Cal. App. 4th 174, 189 (2010) 12 (“This language…in light of the limited nature of relief under the UCL…has led courts 13 repeatedly and consistently to hold that relief [including restitution] under the UCL is available 14 without individualized proof of deception, reliance and injury.”); Baghdasarian v. Amazon.com, 15 Inc., 258 F.R.D. 383, 387 (C.D. Cal. 2009) (certifying UCL class and holding “Plaintiff does not 16 need to show affirmative proof that each individual class member relied on Defendant’s 17 deceptive conduct”). 18 Because each Class Member need not have relied on the alleged misstatements and 19 omissions, there is no need for individualized proof of reliance that otherwise might weigh 20 against predominance. See Chavez v. Blue Sky Natural Bev. Co, 268 F.R.D. 365, 376 (N.D. Cal. 21 2010) (certifying under Rule 23(b)(3) similar claims against the manufacturer of beverage over 22 allegedly misleading label statements and finding “‘relief under the UCL is available without 23 individualized proof of deception, reliance and injury.’” (quoting Tobacco II, 46 Cal 4th at 320)). 24 Like the UCL, the standard for stating a claim under the FAL is “only [a showing] that members 25 of the public are ‘likely to be deceived.’ The standard is that of the ‘reasonable consumer.’ 26 Actual deception or confusion . . . is not required.” Mazza, 254 F.R.D. at 627 (citations omitted). 27 As for Plaintiffs’ CLRA claims, under California law, if Ferrero made material 28 misrepresentations to the Class Members, an inference of reliance—i.e., causation—arises as to 18 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 the entire class. Occidental Land, Inc. v. Super. Ct., 18 Cal. 3d 355, 363 (1976); Massachusetts 2 Mutual Life Ins. Co. v. Super. Ct., 97 Cal. App. 4th 1282, 1292 (2002) (causation/reliance as to 3 each class member is commonly proved by the materiality of the misrepresentation). “Materiality of the alleged misrepresentation generally is judged by a ‘reasonable man’ 4 5 standard.” In re Steroid Hormone Product Cases, 181 Cal. App. 4th 145, 157 (2010). See also 6 Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008) (CLRA “prohibits ‘unfair 7 methods of competition and unfair or deceptive acts or practices.’ . . . [The] unfair business 8 practices claim must be evaluated from the vantage of a reasonable consumer. . . . Under the 9 reasonable consumer standard, [plaintiffs] ‘must show that members of the public are likely to be 10 deceived.’” (citations omitted)).10 Here, Plaintiffs have a simple claim—Ferrero deceptively represents that Nutella is part 11 12 of a healthy balanced breakfast, but in fact, it is primarily refined sugar and saturated fat, more 13 akin to chocolate cake frosting. “A misrepresentation is judged to be material if a reasonable man would attach 14 15 importance to its existence or nonexistence in determining his choice of action in the transaction 16 in question.” Estrella v. Freedom Fin. Network, LLC, 2010 U.S. Dist. LEXIS 61236, at *32 17 (N.D. Cal. June 2, 2010) (quoting Tobacco II, 46 Cal. 4th at 327) (citation omitted); see also 18 19 10 The standard for certifying a class under the CLRA is exceedingly liberal. Individual damage does not require any pecuniary loss. Kagan v. Gibraltar Sav. & Loan Assn., 35 Cal. 3d 582, 593 20 (1984). Moreover: 21 22 23 As it is unlawful to engage in any of the deceptive business practices enumerated in [Cal. Civ. Code] section 1770, consumers have a corresponding legal right not to be subjected thereto. Accordingly, we interpret broadly the requirement of section 1780 that a consumer ‘suffer[] any damage’ to include the infringement of any legal right as defined by section 1770. 24 Id. Plaintiffs are thus entitled to initiate a class action on any of the “unlawful” practices listed in § 1770 of the CLRA. See, e.g., Outboard Maine Corp. v. Super. Ct., 52 Cal. App. 3d 30, 37 25 (1975) (Under § 1770, “[f]raud or deceit may consist of the suppression of a fact by one who is 26 bound to disclose it or who gives information of other facts which are likely to mislead for want of communication of the fact.”). Further, Plaintiffs need not have been individually “damaged” 27 in a traditional sense because, in purchasing Nutella and being exposed to Ferrero’s advertisements, Plaintiffs were denied their legal right to avoid being subjected to Ferrero’s 28 unlawful practices. Class certification for Plaintiffs’ claims are thus proper under Cal. Civ. Code §1781(a). 19 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 Johnson, 2011 U.S. Dist. LEXIS 45120, at *7-8 (quoting Tobacco II, 46 Cal. 4th at 327); 2 Fitzpatrick, 2011 U.S. App. LEXIS 6047, at *8 (“‘recovery . . . does not hinge on whether a 3 particular plaintiff actually relied on [Defendant’s] claims about [the product’s] alleged digestive 4 health benefits’; rather, ‘whether that allegedly deceptive conduct would deceive an objective 5 reasonable consumer [is a] common issue[ ] for all the putative class members, amenable to 6 classwide proof.’” (quoting, with approval, Fitzpatrick v. General Mills, Inc., 263 F.R.D. 687, 7 699 (S.D. Fla. 2010))). 8 “Materiality of the misrepresentations is an objective standard that is susceptible to 9 common proof,” and therefore “statements made on the packing and labels present common 10 proof on the issues of materiality and falsity.” Wolph v. Acer Am. Corp., 272 F.R.D. 477, 488 11 (N.D. Cal. 2011) (citation omitted). Moreover, when the alleged misrepresentations are shown at 12 the point of purchase as here, “it is reasonable to infer that they were communicated to all class 13 members.” Id. at 488. 14 2. 15 Class Treatment is the Superior Means to Adjudicate Plaintiffs’ Claims 16 Rule 23(b)(3) also requires a finding that “a class action is superior to other available 17 methods for the fair and efficient adjudication of the controversy.” Fed. R. Civ. P. 23(b)(3). 18 Courts have wide discretion to evaluate superiority because they are “in the best position to 19 consider the most fair and efficient procedure for conducting any given litigation.” Bateman v. 20 Am. Multi-Cinema, Inc., 623 F.3d 708, 712 (9th Cir. 2010) (quoting Doniger v. Pac. N.W. Bell, 21 Inc., 564 F.2d 1304, 1309 (9th Cir. 1977) (reversing denial of class certification where district 22 court improperly relied on the disproportionality between the potential liability and the actual 23 harm suffered, the enormity of the potential damages, and the defendant’s good faith compliance 24 in determining superiority)). 25 Given the small size of each Class Member’s claim, class treatment is not merely the 26 superior, but the only manner in which to ensure fair and efficient adjudication of the present 27 action. “[T]he modest amount at stake for each purchaser renders individual prosecution 28 impractical. Thus, class treatment likely represents plaintiffs' only chance for adjudication.” 20 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 Pecover, 2010 U.S. Dist. LEXIS 140632, at *68. As Chief Justice Burger wrote, 2 Where it is not economically feasible to obtain relief within the traditional framework 3 of a multiplicity of small individual suits for damages, aggrieved persons may be 4 without any effective redress unless they may employ the class action device. 5 Deposit Guar. Nat’l Bank v. Roper, 445 U.S. 326, 339 (1980). See also Ballard v. Equifax Check 6 Servs., Inc., 186 F.R.D. 589, 600 (E.D. Cal. 1999) (“Class action certifications to enforce 7 compliance with consumer protection laws are desirable and should be encouraged.” (citation 8 omitted)). 9 10 11 II. BECAUSE SHUTTS IS SATISFIED, CALIFORNIA LAW APPLIES NATIONWIDE A federal court in a diversity action applies not only the substantive law, but also the 12 choice-of-law rules of the state in which it sits. Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 13 496 (1941). The Due Process Clause however constrains the scope of a class under one state law 14 unless the class action proponent shows there is a “significant contact or significant aggregation 15 of contacts to the claims” asserted such that “application of the forum law is not arbitrary or 16 unfair” and “so long as the interests of other states are not found to outweigh California’s interest 17 in having its law applied.” Wash. Mut. Bank v. Super. Ct., 24 Cal. 4th 906, 919-21 (2001) 18 (quoting Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 821-22 (1985)). “In resolving whether 19 application of state law would be unfair, the court can look to the expectations of the parties.” 20 Pecover, 2010 U.S. Dist. LEXIS 140632, at *48. (citation omitted). 21 In determining whether significant contacts exist, “the focus . . . is on both the plaintiffs’ 22 and defendant’s contacts with the forum states.” Id. (citation omitted). The location of the event 23 which gave rise to the cause of action is not controlling. See Id. at *49-50 (“Courts . . . have 24 moved away from the view that the location of the event is controlling.”). “Moreover, ‘the 25 relative interests of other states generally is not a matter of constitutional concern.’” Id. at *50 26 (citation omitted) (“California could have a smaller actual interest in the claims than that of other 27 states yet still have significant contacts to satisfy due process.”). 28 21 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 “[S]o long as the requisite significant contacts to California exist, a showing that is 2 properly borne by the class action proponent, California may constitutionally require the 3 [Defendant] to shoulder the burden of demonstrating that foreign law, rather than California law, 4 should apply to class claims.” Wash. Mut., 24 Cal. 4th at 921. Such significant contacts exist 5 here, so a nationwide class under only California law does not offend due process. 6 Ferrero is and has been admitted and authorized to conduct business, and does in fact 7 conduct significant business, in California. See FAC at ¶¶ 13, 22-23. The Court has already 8 found Ferrero has “substantial contacts with this district.” In re Ferrero Litig., 768 F. Supp. 2d 9 1074, 2011 U.S. Dist. LEXIS 50592, at *8 (S.D. Cal. May 11, 2011). That is, in part, because 10 Ferrero’s “California sales alone account for between 13% and 15.2% of its total U.S. sales of 11 Nutella® over the last five years.” Id. (citation omitted). In addition, “13.7% of Defendant’s 12 Nutella shipments went to California customers,” and “Ferrero employs a 15-person sales force 13 in California . . . and Ferrero works with California vendors and distributors in marketing its 14 Nutella® product.” Id. (citations omitted). And, as discussed above, 15 Thus, as the Court 16 earlier concluded, “by choosing to market and sell [its Nutella® product] nationwide, . . . 17 Defendant exposed itself to the risk of being sued in the districts in which its product is sold.” In 18 re Ferrero, 768 F. Supp. 2d 1074, 2011 U.S. Dist. LEXIS 50592, at *7 (alterations in original), 19 quoting Rafton v. Rydex Series Funds, 2010 U.S. Dist. LEXIS 75411, at *9 (N.D. Cal. June 29, 20 2010). 21 Given these contacts, the application of California law to a nationwide class does not 22 violate Ferrero’s right to due process. See Roberts v. Heim, 670 F. Supp. 1466, 1493-95 (N.D. 23 Cal. 1987); Parkinson v. Hyundai Motor Am., 258 F.R.D. 580, 598 (C.D. Cal. 2008) (certifying 24 nationwide UCL and CLRA class where “plaintiffs allege that defendant conducts substantial 25 business in the state through its fifty California dealerships. . . . [and] given the volume of 26 California automobile sales and the number of in-state dealerships, plaintiffs claim it is likely 27 that more class members reside in California than any other state. Thus, plaintiffs’ alleged 28 contacts are sufficient to satisfy the test under Shutts.”); Pecover, 2010 U.S. Dist. LEXIS 22 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 140632, at *55 (“California, for purposes of its UCL, ‘has a clear and substantial interest in 2 preventing fraudulent practices in this state and a legitimate and compelling interest in 3 preserving a business climate free of . . . deceptive practice.’ . . . For this reason, the state ‘has a 4 legitimate interest in extending state-created remedies to out-of-state parties harmed by wrongful 5 conduct occurring in California.’” (citations omitted)); accord Church v. Consol. Freightways, 6 Inc., 1992 U.S. Dist. LEXIS 18234, at *13-14 (N.D. Cal. Sept. 14, 1992) (“[I]t is very probable 7 that the deceit claims would not be addressed comprehensively if California law is not applied. 8 Thus, even if other states have an interest in applying their own law, this interest does not 9 outweigh California's interest in facilitating a class action. [citation].” Moreover, “[a]ll 10 jurisdictions share the goal of deterring fraudulent conduct and providing a remedy for the 11 victims of fraud [and] each jurisdiction would rather have the injuries of its citizens litigated and 12 compensated under another state’s law than not litigated or compensated at all . . . It appears that 13 the maximum attainment of the underlying purposes of all the states will be achieved best by 14 certifying the class.”). 15 Where “plaintiffs show that application of California law is constitutional under Shutts, 16 defendant must show that another state’s laws apply under the California governmental interest 17 choice-of-law test.” Parkinson, 258 F.R.D. at 598. “California follows a three-step 18 ‘governmental interest analysis’ to address conflict of laws claims and ascertain the most 19 appropriate law applicable to the issues where there is no effective choice-of-law agreement . . . 20 .” Wash. Mut., 24 Cal. 4th at 919 (citations omitted). Under the first step of the governmental 21 interest analysis, the foreign law proponent “must identify the applicable rule of law in each 22 potentially concerned state and must show it materially differs from the law of California.” Id. 23 Importantly, “[t]he fact that two or more states are involved does not in itself indicate there is a 24 conflict of laws problem.” Id. at 919-20. See also Wershba v. Apple Computer, Inc., 91 Cal. App. 25 4th 224, 242 (2001) (certifying nationwide CLRA and UCL class, holding differences among 26 states’ consumer protection laws were not material and therefore were not a sufficient basis on 27 which to deny nationwide class treatment); Hanlon, 150 F.3d at 1020 (same). 28 23 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 Only if the trial court finds the laws are “materially different” must it proceed to the 2 second step and “determine what interest, if any, each state has in having its own law applied to 3 the case.” Wash. Mut., 24 Cal. 4th at 920. “This means the trial court may properly find 4 California law applicable without proceeding to the third step in the analysis if the foreign law 5 proponent fails to identify any actual conflict or to establish the other state’s interest in having its 6 own laws applied.” Id. “Defendants must do more than show a variance in the law. They must 7 show that the interest of other states in having their laws followed in this case is greater than 8 California’s interest in applying its own laws.” In re Activision Sec. Litig., 621 F. Supp. 415, 430 9 (N.D. Cal. 1985) (“Despite defendants’ showing that material differences may indeed exist 10 between California law and the law of other states, defendants have failed to indicate why 11 California law would not apply in this case.”). 12 Even if some other states may have more restrictive consumer protection laws than 13 California’s, those states lack any interest in applying them here, since this case does not involve 14 local defendants: “the purpose behind liability limits is to protect resident defendants, not limit 15 damages awards to resident plaintiffs.” Pecover, 2010 U.S. Dist. LEXIS 140632, at *56-57 16 (citation omitted); see also Kearney v. Salomon Smith Barney, Inc., 39 Cal. 4th 95, 110 (2006) 17 (A “state by enacting a limitation on damages is seeking to protect its residents from the 18 imposition of these excessive financial burdens. Such a policy does not reflect a preference that 19 widows and orphans should be denied full recovery.” (citations omitted) (quoting and discussing 20 Hurtado v. Super. Ct., 11 Cal. 3d 574 (1974))); Hanlon, 150 F.3d at 1022-23 (“idiosyncratic 21 differences between state consumer protection laws are not sufficiently substantive to 22 predominate over the shared claims.”). 23 “To the extent that California’s consumer protection laws are more generous than those 24 of foreign states, foreign states have no legitimate interest in denying higher recoveries to their 25 residents, and thus there can be no true conflict under California law” Pecover, 2010 U.S. Dist. 26 LEXIS 140632, at *57 (citation omitted). Thus, for example, Arizona may have more restrictive 27 consumer protection laws than California, but it has no local defendant to protect and no interest 28 in seeing those more restrictive laws applied over California’s, especially if asserting such an 24 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION 1 interest would deprive the state’s citizens of membership in the Classes. See Hurtado, 11 Cal. 3d 2 at 581 (“Since it is the plaintiffs and not the defendants who are the Mexican residents in this 3 case, Mexico has no interest in applying its limitation of damages—Mexico has no defendant 4 residents to protect and has no interest in denying full recovery to its residents injured by non5 Mexican defendants.”). CONCLUSION 6 7 The Court should grant Plaintiffs’ Motion for Class Certification by certifying a 8 nationwide class for the causes of action alleged in Plaintiffs Master Consolidated Complaint. 9 Further, the Court should appoint Athena Hohenberg and Laura Rude-Barbato as Class 10 Representatives because these Plaintiffs will adequately represent the class as they share a 11 common interest in establishing Ferrero’s liability. Finally, the Court should appoint The 12 Weston Firm and the Law Offices of Ronald A. Marron Class Counsel as they will adequately 13 and zealously represent the Class Representatives and Class Members against Ferrero U.S.A. 14 DATED: August 15, 2011 Respectfully Submitted, 15 /s/ Jack Fitzgerald By: Jack Fitzgerald 16 17 18 19 20 21 22 23 24 25 THE WESTON FIRM GREGORY S. WESTON JACK FITZGERALD MELANIE PERSINGER 888 Turquoise Street San Diego, CA 92109 Telephone: 858 488 1672 Facsimile: 480 247 4553 LAW OFFICES OF RONALD A. MARRON, APLC RONALD A. MARRON 3636 4th Street, Suite 202 San Diego, CA 92103 Telephone: 619 696 9066 Facsimile: 619 564 6665 Interim Class Counsel 26 27 28 25 In re Ferrero Litigation, Case No. 3:11-CV-00205-H-CAB MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF CLASS CERTIFICATION